The best-laid plans of Mellon Financial just aren't good enough when it comes to returns, analysts argue, but Martin G. McGuinn, Mellon's chief executive, claims his company just needs more time to grow.

"On paper and conceptually, they are doing a lot of the right things.  In some cases execution of that strategy could not have been better," Kyle Cerminara, an analyst with T. Rowe Price, told The New York Times. T. Rowe Price holds a large stake in Mellon.

While the plan may be sound, the pace is frustrating for shareholders, leading to speculation about the future of the firm. Despite dumping its commercial banking interests and developing more lucrative money management business, Cerminara added, "The stock performance, until recently, has been sub par and there have been a number of disappointments along the way."

For example, a possible asset management joint venture with Merrill Lynch fizzled last fall, and Mellon's plans to launch a human resources and consulting subsidiary also tanked.

In the third quarter, the Pittsburgh-based company's asset management profits rose 12% over the same period in 2004. Trading funds under the Dreyfus brand, Mellon has about $766 billion under management.

Yet the company's price-to-earnings ratio hovers around 18, while competitors like Black Rock and Legg Mason are close to 30. Custodial banks State Street and Northern Trust both trade with price-to-earnings rations better than 20.

In 2007, McGuinn, 63, will retire, exacerbating rumors that Mellon may sell.

With a search for a new executive well under way, McGuinn dismissed the whispers as just that. "If we were going to sell Mellon, why get a new CEO?"

Michael A.  Bryson, the company's chief financial officer, said Mellon is more likely to buy than sell. "It would be very difficult for someone to swallow us because of the P/E ratio," he said. "It would be a very dilutive transaction."

Meanwhile, Mellon makes money on other enterprises, including processing payments for mortgage companies and tracking securities for institutional investors, such as pension funds, hedge funds and charitable endowments. Analysts encourage the company to sever its back-office support businesses to add value.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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